Luminar Technologies Inc

NASDAQ:LAZR

Earnings Call Analysis

Refining the Strategy Towards a Receptive Market

The company has made notable advances, leveraging third-party data from IHS for volume estimation, which has led to a more conservative projection, reducing the size of its order book by $400 million. This change positions the firm with a more analytical approach, using a 25% take rate as a baseline for non-standard awards, with sensitivity highlighting that a 5% swing could impact the order book by another $400 million. The management emphasizes that the adoption of their technology by 80% of top automakers by 2030 is a strong indicator of industry commitment. Moreover, the company successfully secured approximately $800 million in gross wins in 2023, slightly below its $1 billion target, attributable to deferred decisions into 2024, rather than lost opportunities.

Navigating EV Headwinds and Mapping Path for High-Volume Production

On the production front, the company prepares to showcase high-volume production imminently, signaling a steadfast move towards mass adoption. Additionally, with macro headwinds like the EV market challenges, the company plans to clarify its next-generation product roadmap and offer more insights during Luminar Day. The distinction is made that while the company's technology is suitable for EVs, it's also relevant for combustion engine vehicles, underscoring the versatility and widespread applicability of their lidar solutions.

Strategic Focus for Sustainable Growth

The company's strategic decision to focus on passenger and consumer vehicle spaces rather than autonomous robo-taxis has positioned it for sustainable growth with less than 1% of its order book currently in the autonomous vehicle space. This choice is seen as a protective measure against potential downturns in the autonomous vehicle market, leveraging existing product lines and anticipated innovation unveiled at Luminar Day to foster growth. They anticipate their next-generation product could lead to at least another order of magnitude in terms of volume opportunity, fueling further industry adoption. The executive team envisions lidar technology becoming as standard as the three-point seatbelt introduced by Volvo, where the true benefits of the technology, particularly in safety, can be universally recognized and adopted.

Earnings Call Transcript 2023-Q4

[Aileen Smith, executive]

And we'll be muted throughout the meeting for 2023 business update call. My name is Aileen Smith, and I am Luminar's Head of Investor Relations. With me today are Austin Russell, Founder and Chief Executive Officer; and Tom Fennimore, Chief Financial Officer. As a reminder, this call is being recorded, and you can find the shareholder letter that accompanies this call at investor.luminertec.com. Hopefully, most folks have had a chance to review our shareholder letter as we are continuing with our new earnings format this quarter. As of last quarter, we will spend the majority of the call addressing questions from our stakeholders, including the retail investor questions posted on the safe platform, institutional investor questions e-mailed to our investors inbox and live questions from our analyst community. We will be changing these platforms intermittently through the consideration of the call to address any questions that come in real time. I also wanted to begin our call with some welcome remarks, including a look back on '23 and a look ahead into 2o23. Before I pass the call over to him, I wanted to remind everyone that during the call, we may refer to GAAP and non-GAAP financial measures. Today's discussion also contains forward-looking statements based on the environment as we currently see it, and as such, does include risks and uncertainties. Please refer to our shareholder letter for more information on the specific risk factors that could cause actual results to differ materially. With that, I'd like to introduce Luminar's Founder and CEO, Austin Russell.

[Austin Russell, executive]

Thanks, Eileen. And great to see all you guys here. So maybe just a quick over before we jump into Q&A if you've had a chance to be able to take a look at that letter kind of informational package. The team of I have been really quietly a heads down focused on execution and the core execution for our business with all eyes on the industry's first production vehicle launch with Luminar and Volvo as standard on the new EX90. And it's funny is I think this is going to be maybe even the last earnings calls where we're a preproduction R&D company before we truly enter our growth stage. And I'd say it's become abundantly clear that we've all seen all the challenges that the autonomy industry has faced historically in being able to develop, industrialize and enable this next generation of capabilities on vehicles and bring it out into the commercial world and into consumer hands. And really, all of this has been laid there to the public in recent history in the media and whatnot. A lot of this just comes down to the ambition of what most have been in the industry have been trying to do or replacing the driver altogether with robo-taxis. And this is where for Luminar from the beginning, we've taken a strategy of enhancing the driver and really focusing in on production vehicles. And that's where Luminar is exceeding where the rest of the industry hasn't. In the last 10 years of what we've done at Luminar, I've really been leading up to this global launch on production vehicles right around the corner with Volvo, and we'll be covering this at Luminar Day. To date, we've invested over $1 billion to develop a technology foundation, product industrialization capabilities. And this year, it's showtime. And it's true that there are incremental costs like maybe what you saw this quarter that was more than the target, and we don't control all the timing for the vehicle launches. And we've learned a lot through the years on how we can even be more efficient. But now that's in our rearview mirror. And for the first time, our multibillion-dollar order book is going to be converting to revenue this year. For the first time, we're going to start seeing the benefits around the world into consumers' hands. And of course, automakers are going to be -- well, maybe I shouldn't say, of course, but in the case of Luminar, automakers are going to beginning to directly market our technology to their consumers. And this initial EX90 launch is going to be preceded by a flurry of additional mass-produced vehicle launches with automakers around the world over the coming 36 months following this. So yes, it's a very exciting time, certainly going to be enabling a lot of additional operational and economic efficiencies and exponential economic growth as we start realizing these benefits of the economies of scale with this program. So very excited everyone. Stay tuned for a special Luminar Day on April 23, and happy to be able to jump in with Tom here to be able to talk through the business what's ahead and yes, well, sort of what we've had. As it relates, of course, to this year, we were able to hit the majority of the overall milestones that we had throughout 2023, and we can give a little bit more commentary and questions on all of that.Again, the critical part is are all around the core execution leading up to this launch. But we have also, in addition to that, been able to continue to scale our business, adding additional vehicle model commercial programs overall to our business plans. But again, the critical part is all about execution. That's what the industry hasn't done historically to be able to successfully launch and that's what we're excited to be able to make happen for the first time. I think we're ready for Q&A, Aileen, if you want to start us off.

[Aileen Smith, executive]

So we are going to begin with a couple of questions from our safe platform. Our first question was reiterated in a couple of different capacities. But as such, I think there exists an information gap between the performance of the company and how it's being evaluated by Wall Street. Are there any plans to bridge this divide and bring new investment into the company and stock?

[Austin Russell, executive]

I think Tom knows this, just as well as I do. And obviously, we all have very much shared in the frustration from some of these market dislocations and whatnot. And the reality is that there has been a disconnect in value over the last few years relative to what we've been able to accomplish. Everything from, again, scaling from technology to product of going into now series production going from, what, like order book of less than $100 million to $4 billion from being able to actually successfully invest, develop and deliver on these kinds of capabilities. And that's not to say that there's a lot more to do. We've got a lot to prove out. But there's also a lot of other factors that come into play in certain technical factors that I've had for better or worse to all learn about through the way. The important part is, I think, when you talk about value, Luminar as a company is operating in a way to be able to deliver that long-term value overall to our shareholders, and that's that our north star in that. And that's exactly what we're doing to be able to use, I would say, also comparable companies historically to what the NVIDIAs, the Teslas, the mobiles of the world have done in equivalent stages as benchmarks towards our journey to success. And as we execute, we have the opportunity to be able to become exactly like that.

[Aileen Smith, executive]

Our second question from the safe platform. In its 10-K filed on February 23, Mobileye noted that it's no longer actively working with Intel on its FMCW, lidar development. Further, they noted that Mobileye is pursuing a different lidar technology. Can you please elaborate on how this affects Luminar?

[Austin Russell, executive]

So when it comes to Mobileye, I probably can't comment on our partner's internal business. But when it comes down to it, I will say that that's probably just get another validating point that this stuff is hard, like it's not easy to be able to take things from -- people dramatically underestimate what it takes to go from Powerpoints to technologies to industrialized products for scale. And I would just say that's not even specific to any individualistic company, but also more generally the industry at large. And obviously, as more and more people realize this is ultimately more and more beneficial to Luminar where we have done that. And I think that this is, again, all the more important to be able to show how we can successfully launch as well. And people are reading the tea leaves in the industry, too, for that map because it costs real money to keep running these programs, too.

[Aileen Smith, executive]

With that, we're going to switch gears and take a couple of questions from our analyst community. I would remind our analyst community that we will allow one initial question as well as a couple of follow-ups. Our first question is going to come from John Babcock at Bank of America.

[John Babcock, analyst]

Just the first question I had on order book. I noticed there was a change in the way that you're calculating that. And last quarter, you provided guidance that you expected to have this year at around $1 billion plus in additional order book. I think you mentioned it was around $800 million. I was just wondering how much of the impact or the gap there was from the change in the calculation? And also, if you could just provide specifically how much that calculation overall impact in 2023, that would be great.

[Thomas Fennimore, executive]

And John, it's Tom. Let me start off with that. And first, let me talk about how we've done it differently. We ended '23 with about 25 awarded vehicle lines or commercial programs. And what we've done this year that is different than what we've done last year, and this is just part of us being on that merger of the SOP and continuing to mature is we listed each of those vehicle lines. We then went to IHS as, I would say, the ground truth for the volumes to use in calculating our order book as well as our internal forecasting. So we used IHS as a source of those volumes for SOP dates and EOP dates for the vehicle lines that we have awarded. If we're standard like on the Volvo EX90, you just take 100% of that. If you are not standard, what we've done is we've assumed a blanket 25% take rate. We looked at market data; we looked at what our customers are telling us. It typically range between 5% and 50%. We use 25%, which is a little less than the midpoint. Put a pin in that we'll talk about a sensitivity analysis in a sec. And then we rolled up the order book that way. I would say, if you look at on an apples-to-apples basis relative to the business we already won, about a $400 million decrease because I would say, on average, ISS has more conservative volume estimates than I would say the more the customer derived ones that we've used historically. If you look at what our total gross wins were during 2023, it was about $800 million. It was still a little bit shy than the $1 billion that we forecast because some decisions we were expecting to making 23 have been deferred into '24. We really didn't lose anything that we wanted to win. But I would say that more conservative forecast there was about a $400 million headwind in terms of the order book size that we've reported. Now going back to the take rate of 25%, if you want that to be 5% higher to 30% or 5% lower to 20% or whatever number you want to choose, A 5% change in that assumption impacts the size of our order book by about $400 million. So we wanted to give that additional disclosure so that people can make their own estimates of the order book size there. But I would say it's a more analytical bottoms-up based on more third-party sources for volumes as opposed to using what our customers have provided us.

[Austin Russell, executive]

And on that note, what's great is we want to help set the standard in the industry when it comes to order book type of calculations because we've seen, I would say, radically different views of what those can amount to and that's why it's like oh, if you use the same kind of calculation that then our order book would be $100 billion or I think at this point, which is at that point, it just becomes irrelevant. We're probably still getting a fraction or not much credit at all today for even the order book that we have. So that's where I think what is cool is that now, whereas I think when we were first doing this even before Tom was on board some years ago, IHS volumes didn't exist for any of these things. And now, okay, like these models are starting to come to fruition. And that's what's at least exciting to me in starting, what, in months and the countdown.

[John Babcock, analyst]

Just last question before I turn it over. I think like one of the difficult aspects of certainly your industry is trying to gauge like how the adoption is for the different companies and how they're thinking about that. Just curious, is there any change in how companies are anticipating the adoption of autonomy? It seems like it's getting pushed off broadly, but just wondering if there has been any material change over the last quarter. So we've read about EV falling and that does have some natural flow through given the technology option in EVs relative to currently for Iris vehicles anyway. But just overall, if you could talk about how that cadence has changed, if it has changed at all from last quarter, that would be useful.

[Austin Russell, executive]

Maybe I'll start off that. I would say when it comes to the overall industry; we have the roll-up on this. Now the majority and actually around 80% of the top 20 automakers are planning on integrating either or lidar or just long-range lidar generally by 2030 and have it on the road map to be able to do that into their production vehicles. So there definitely is a -- and for the remaining portion, I think it's like the remaining 15% is they're figuring out 5% isn't. But there's no shortage of interest in demand and everything in terms of what ultimately the ability for these technologies to get integrated across vehicles is. The whole job of what we have is how do we find ways to further accelerate that adoption curve? Naturally, to the point of like one thing that I think a lot of people in the tech industry don't appreciate as much since we're this weird mix of both the technology company and an automotive company at the same time is that automotive design cycles are very long, as I know you know, of course. And this is where you take a look at like historically of the adoption cycles for new kinds of technologies in the automotive industry, and you're talking about like 20 years from the time that something gets first introduced to when it was standardized ultimately on every vehicle. For lidar generally, I think we're actually seeing a faster adoption curve than probably any other technology maybe in automotive history or even just the overall concept of like, I think, like battery electric vehicles are still like only a single-digit percentage of vehicles sold after 20 years, like this stuff takes time, but the economics are massive when you're able to realize it.And that's why it's just so powerful to have real market penetration into this. And that's where I'd also say it goes back to -- and one of the things I put in the letter is quality over quantity because you could have a dozen different OEMs that you're working with, but if it's like just on a single low-volume like vehicle that may or may not happen that's like only so meaningful. If you are able to successfully come to fruition and realize the value and benefits of the partnerships that you have, you're talking about tens of billions of dollars in value that you can successfully realize even from, for example, in our case, just the existing customers that we're working with. So that's where it's going to be important. I think to the overall point though, on EVs, and the last one that I want to address, there is -- to your point, that is very real in terms of the growth headwinds that I think a lot of EV companies are facing. And ultimately you're the analyst on that not me, but from our conversations with some of the like pure EV companies, that's always the case. I think though that what is important, and this is very much also a misconception. I think about Luminar generally, is the idea that we are only for EVs. The amounts of people that have literally gone have called Luminar, like an EV Company or [indiscernible] company is surprising. So I think what is actually probably very surprising to many, is that for the majority of vehicle platforms that we're on, they do include combustion vehicle models or variants. And that's where I think that there is going to be a lot of value growth. And the reality is that it is true that combustion engine vehicles aren't like just disappearing overnight. But our technology and the safety benefits of this technology and the time saving benefits of this technology is independent of powertrain. So it's independent whether it runs a [indiscernible] lithium ion. So that's that sort of the perspective that we have, and I think doesn't sort of materially affect the value or value proposition of what we're doing overall. But that's the perspective.

[Aileen Smith, executive]

Our next question comes from Josh Buchalter at TD Cowen.

[Joshua Buchalter, analyst]

To start following up on John's first one, unless I missed it in the shareholder letter, you didn't provide an order book target for this year. I was wondering if you could maybe speak to the rationale behind why you're not providing it this year. And maybe if you're not going to quantify, are there any qualitative commentary you can give on upcoming RFPs SKUs that you can help us better understand sort of the business funnel.

[Thomas Fennimore, executive]

Look, Josh, I think it's fair to say we're going to significantly grow our order book this year. 2024 is where we're going to be actually transitioning the order book from potential revenue into actual revenue. And so what we're going to be talking a lot more about this year is what our revenue is going to look like particularly from Series production revenue. We gave some guidance for what we expect that to be on a quarterly run rate in the latter half of this year, particularly in the mid-30 range. We're confident that Volvo is going to start production on the EX90 in Q2. I think the ramp-up and the exact pace as we get more confidence and clarity on what that exactly is going to be, we're going to refresh that as well. The order book is going to go up significantly. And what I would say is in the conversations we're having with customers, both new customers and existing customers, there are some macro headwinds that we talked about before like EV headwinds and how that impacts our product planning as well as, I would say, some of the software complexity around getting these systems that right. But I would say when it comes to Luminar; they want to actually see us get the high-volume production, which we will in the coming weeks. And I think they want more clarity when our next-generation letter is going to look like, and we'll talk more about that at Luminar Day. Once we get those 2 things, that's going to unlock a lot more business. And as we win it, we'll set more specific targets.

[Joshua Buchalter, analyst]

Actually another one for you. You called out the goal, I think, of $115 million in liquidity exiting the year. Any more details you can provide on how we bridge that number? And maybe you can give us details on your expectations for OpEx trajectory because you're in a ramp phase, but you also mentioned the industrialization costs should be coming down, and it sounds like there's also some belt tightening. It would be great to hear some more color on how you expect to get to the $150 million number.

[Thomas Fennimore, executive]

The starting point we're using there is the $340 million, which is a $290 million of cash and the $50 million of credit facility that we recently put in place. Our prime objective has always been get to Volvo EX [indiscernible]. If we have to spend a little bit more to get there at the sacrifice of our near-term results like what we did in Q4, we're going to make that. But now that we're getting really at Volvo SOP, we're really going to start the belt tightening. We're going to start aggressively attacking our unit economic costs, particularly the BOM in the manufacturing conversion costs. And then we're going to look to streamline Luminar and really assess what is core to us and then what are some things that can be done better in other ways. And we're going to start really looking at how we can streamline the organization. That as well as the wind down of some of the Iris industrial in costs are going to continue to have our net cash spend in the right direction. It started that way in Q4. We were hoping it will be a little bit better, but it was still a big improvement from what the first half of the year look like there. I would say our internal targets are a lot more aggressive than the $150 million we have here. But I think once again, we want to get a little bit more clarity on exactly what that Volvo ramp-up is going to look like and then what the corresponding cost ramp down looks like, and then we'll provide more clarity on some of the actions we're taking here in a little bit.

[Austin Russell, executive]

And I'll also say that, when it comes to just the overall business and environment, I think, I just want to make sure there's broad. We're not oblivious to the overall change in macro environment, which we know there has been a significant change. There's been changes in the industry, changes in other stuff, not all of it is explain like I said, from a market standpoint. But just more generally, I think it's totally fair to say that the kinds of investments that we're going to be doing going forward are going to be done on a much more conservative basis, like -- and sometimes, to be honest, it's painful because it's like, oh, we know this is good. This is absolutely going to have like a great 5- to 10-year payout if we do X, Y and Z. But like that's the kind of thing that maybe brings you from like a $10 billion company to like a $20 billion company. I think the point is, is that let's focus on the core of what's driving and validating the value of what we have, let's focus on validating the order book. That's the same reason why -- like, honestly, we can continue to add billions of dollars to the order book for everything that's fantastic, but like we're not actually even really getting credit through even a fraction of what we have today. So that's why I think focus on the floor, focus on validation. And I think just to be frank; there definitely are greater efficiency opportunities, in particular, given this over $1 billion investments that we've made historically. We're past that peak of cash spend, and we're riding that tailwind from that big investment that we've made to be able to realize the full benefit for the next decade to come from that technology foundation, product foundation and industrial capabilities that we build.

[Aileen Smith, executive]

Our next question comes from Itay Michaeli at Citibank.

[Itay Michaeli, analyst]

Just a couple of follow-ups for me. First, on gross margin, I know in the past, you have provided some targets there. When you hit the mid-$30 million target, any color you can share come around how we should be thinking about gross margin for the company at that point?

[Thomas Fennimore, executive]

We're hoping to see some improvements in Q4. It took a little bit more effort to get ready for the Volvo SOP, which, as I mentioned before, was the prime directive and the right priority here at Luminar. It's all going to be dependent Etay on how quickly that volume ramps up and how quickly we can ramp down the cost, both the unit economics as well as some of the fixed costs that we have embedded in our COGS, which is a fair amount. And so we are actively working on a plan to make that happen as fast as possible. And as we get more clarity on the ramp-up at Volvo in the corresponding ramp down in the costs, which is going to be the biggest driver on that. We'll get more clarity there. But I think it's very safe to say that you're going to see a fair amount of improvement as we get into the latter half of the year.

[Austin Russell, executive]

The other thing that I note more generally is that this overall notion of COGS is like extremely confusing to a point where like I have to dissect it of like what are all the different components that go into this in terms of it's actually like a surprising amount of components that go into this, particularly from the industrialization side as well. You're talking everything from literally consultant costs all the way through other one-off costs that you have to be able to accomplish. And I think that's the part that we're really focused on driving. Of course, we're also focused on driving further the unit economics. But even today from a variable cost perspective, it is incrementally positive already, which was how we originally underwrote some of the thinking around gross margin more generally on a product basis across the board for the different kinds of product capabilities that we have. So that's what is positive and obviously, not what is immediately obvious. But I think that's where we're going to also have to figure out how we can better break out some of the industrialization costs. But most importantly, make sure that cost is still cost and we want to be able to realize the economies of scale of Volvo and drive that down by the time that happens to come within the first half of the year.

[Itay Michaeli, analyst]

Maybe just a quick follow-up going back to the order book. To what extent was the shortfall in '23 tied to the timing of the next-generation lidar? And if it was, how should we think about when your customers can make decisions, sourcing decisions around that next-generation lidar?

[Thomas Fennimore, executive]

We'll talk more about that. What I would say is I've always described our next-gen lidar as a smaller, better, cheaper. And we're looking to accelerate that in terms of some of the commentary streamlining, making sure that we can industrialize our products faster, applying the lessons we've learned over the last 3 years going through what we went with on Iris to make sure that we can get it to the market as fast as possible because our customers really like that product. They really want it. And I would say the time lines that we're working on for that are starting to align with their product planning cycle. It's not exactly there yet, but it's going to be there pretty soon. And I would say, waiting a few months to get that next better product as opposed to taking ours, which is a great product today. But taking that for 6, 12 months and then transitioning to the next-generation one when there's a natural slowing as people revisit their product planning because of the EV headwinds, some of the software struggles are facing, that is aligning. And I would say, we didn't lose anything that we wanted to win. That wasn't the reason for the order book mix, if it's all just decision-making that was supposed to happen by '23 being deferred in the 24.

[Austin Russell, executive]

And I will say that when it comes to product planning cycles and programs, part of the whole point is that there's a relatively limited like there's only so many automakers that are early adopters of something. That's part of the reason why a lot of this stuff is super lumpy as well along the way. And I think, as I said, we won everything we wanted to win this past year. The thing is that when it comes to product cycles for this, the way that we're thinking about the road map side of it is a new step function improvement in product every 3 to 4 years. I know a lot of times in just certain industries will have like 1- to 2-year product cycles, but like that's not particularly useful in automotive because you have like 7-year long program spans and even then you really want to be able to best leverage the economies of scale and supply chain. So of course, for the next-gen stuff, that's what I'm really excited to be able to unveil at Luminar Day, given that the work that we've done for, like, 5 years now on the back end for this next-generation technology development. And that's where the transformation can happen whereas like an Iris, it's great for once there is comments like what now it's scaled up to 25 vehicle models and programs with that. But that's something that goes like 100,000 million or whatever with the next generation, that's where you could ultimately see this being on mainstream vehicles, it's capable of being on tens of millions of vehicles and scale it accordingly. So that's really the breakthrough objective that we have ahead, but we'll share the details at Luminar Day.

[Aileen Smith, executive]

We're going to take a few questions from the safe community. First one, how will the company offset the loss of business for autonomous vehicles as the need appears to be shrinking and not growing? Are you planning for growth or planning for sustainability?

[Thomas Fennimore, executive]

We're planning for both. When you look at the order book and what we've calculated that and you look at autonomous robo-taxis, I think there's a few million dollars, so less than 1% in our order book, and that's simply from POs that we have in hand for this year. And so our order book is almost in the passenger vehicle and consumer space. That is a bet that Austin made several years ago to focus on that. If and when robo-taxis get here in the near future, that's great. That is all upside to our order book as well as our near- and medium-term growth.

[Austin Russell, executive]

And I would say not only that is that the stuff that -- and this is oftentimes very much confused with Luminar and obviously, part of the frustration as it relates to the broader industry, sometimes we get painted with the same brush. But some of this flaring they've had not -- that doesn't affect any portion of the business because we didn't have any of that, but we've had to focus from for production vehicles the whole time. It actually is further validating of our thesis that we made the right moves in this. And that's why also we're able to lead the charge. A relatively small company like Luminar shouldn't won out over the Waymos and Cruises and Auroras and Apples and other stuff of the world to be able to be first to a global production vehicle with this kind of technology because it doesn't make sense. So the reason why it just comes down to the right technology, the right strategy, the right bets, the right capabilities that we're building from a full tax standpoint. And obviously, the goal is to have that validated where we can get separated from that pack of autonomous vehicles, companies that maybe haven't been as successful and really show how we can be more like those other kinds of growth comparable companies I mentioned earlier.

[Aileen Smith, executive]

Our second question is, is the higher cost of implementing lidar, the reason behind as to why car companies are holding back on lidar? If so, do you see this technology be something cost-effective in the future to be widely considered by most car manufacturers?

[Thomas Fennimore, executive]

I think we're there today, particularly with our next-gen product, where, as I mentioned, we're going to be taking the cost down. And so look, our customers are always going to ask for lower pricing, but we've been able to commercialize and industrialize our initial product with Iris to get it on vehicles starting here imminently. Now albeit it tends to be at the higher price point, which is very consistent with the introduction of any new technology. But I would say, while our OEM customers are always going to beat a boot cost that is not really what I would say is an obstacle for us winning more business, particularly with our next-gen product.

[Austin Russell, executive]

And I would say the biggest barrier is just the natural adoption cycles that we talked about earlier. I just it takes time for new vehicle platforms to come out and get adopted. And the reality is that folks like particularly in particular, Volvo is always the first to introduce new kinds of safety technologies. Mercedes is generally the first to introduce new kinds of other advanced technologies. We're working with both of those companies to be able to make that happen to production show the industry what's possible and then it trickles down from there.

[Aileen Smith, executive]

We're going to switch back to our analyst community. Our next question is going to come from Kevin Cassidy at Rosenblatt.

[Kevin Cassidy, analyst]

And it was right along the same lines as and Tom, what you were just saying, look, I want to understand more about the next-gen product and the market that you're addressing with that. How much larger is it? How many more bids are you looking at them compared to the early adopters? I just want to see where the momentum is.

[Thomas Fennimore, executive]

So if you take a look at our opportunity on this -- like I said, I think we're kind of within this same realm in the world with Iris and Iris Plus the next-gen product that unlocks, I would say, probably at least another order of magnitude of volume opportunity, maybe more. Arguably, there's actually already in order of magnitude, additional volume opportunity even with just our existing customers on lidar alone, much less new customers. So I think this is where we see this as a big opportunity to drive further adoption throughout the industry. I think also though that the most critical part of all this is all going to be about recognition of value. Right now, I think lidar is cool. It seems important. But it doesn't yet have the status of what Volvo is called ask the 20% entry seat belt and that's where we want to be able to get to. So that this is truly a standardized technology across the industry. And there's frankly no reason why that can't happen. The key is just showing also the safety benefits and SOI. I had mentioned that we've been collaborating with these third parties to provide our technology to them for testing that's being independently run to be able to quantify the safety benefits of what can be had on vehicles. And we have a host of different automakers that are actually extremely interested in the results of this comprehensively as it relates to their product planning and for that matter, insurance companies, too, for that matter when it comes to the safety benefits and improvements, which directly affects us. And that's why when you talk about the long-term benefits of other than this, you're talking about thousands of dollars of value and savings being added for every lidar put onto a vehicle, assuming any material safety improvement and savings when you take a look at a total cost of ownership perspective. So that's where we need to get to just needs to be broad recognition of value as well. But it also takes, of course, the product to be scalable to do that. And that's where one of the milestones that we have for this year in addition to scaling up the factory that we have done in Mexico, we're also getting our next also high-capacity battery online as well as support additional production.

[Kevin Cassidy, analyst]

Maybe just as a follow-up, you hit on a couple of points there. But right now, the buyer when he's buying the Volvo car, is it an option for him to put in a Luminar lidar? Or is it standard?

[Thomas Fennimore, executive]

Standard.

[Aileen Smith, executive]

Our next question will come from Kevin Garrigan at WestPark.

[Kevin Garrigan, analyst]

I'm just wondering if you can talk about the progress that you've made with Civil Maps. I mean one of the U.S. automotive OEMs recently talked about continuing to use lidar for mapping. So wondering if that's becoming more of a talking point in your discussions with OEMs than maybe it was 6 months ago. And does that put you an advantage compared to others that are finding for the same RFQs?

[Thomas Fennimore, executive]

Absolutely, it is. I like to describe it as value created in the ecosystem by our lidar. Austin just mentioned the safety improvements, which manifests itself in the insurance savings. The other Kevin, before you just asked it for an option or a standard, for a lot of the customers we're talking to, it's an option for L3 or certain levels of autonomy, which the consumer has demonstrated a willingness and ability to pay for. And for here, you're going to have a lot of vehicles that are going to be driving around collecting 3D data, which is a very useful tool to map the environment around you. And so we want to work with our OEMs, and we're having conversations with them is about how you can capture that and monetize it. Because ultimately, the more value we can create with our lidar, the more willingness that they are to buy it, and as I mentioned earlier, beats less up on price because they're going to look at the value created in the ecosystem and the more tools we provide and to do that, the better it's going to be. So I'm not going to go into much more detail now. But yes, we are getting good commercial traction on the mapping side. And it's another tool in the arsenal when we go in and have those strategic and commercial conversations with our customers.

[Austin Russell, executive]

We'll share more on Luminar Day.

[Kevin Cassidy, analyst]

And just as a follow-up, can you talk a little bit about how things are going with Nissan? Are things on track with what you've been expecting are things taking longer? Or is the sign waiting for the next-gen lidar? Any update there would be great.

[Thomas Fennimore, executive]

No, look, they're continuing to move forward. As a reminder, Nissan, we're at a development contract that at some point in the future is going to convert into series production. We're very confident of that. And we're continuing to move forward on the development side, as I mentioned during the last earnings call that moved into the next stage of the development contract. As a reminder, right now, we have 0 in the order book for Nissan. And the reason for that is they really haven't converted that from a development contract to a serious production contract. And one of those things that is ultimately out of our control. It's going to be dictated by NIDEC's product planning and when they're ultimately ready to start putting that on series production awards. I think that is going to happen soon. They're working with a version of virus. They're not waiting for the next-gen product, although, as you can imagine, I think they're very excited about it. And I would say we're in discussions with them about how we can grow within the Luminar ecosystem in addition to just lidar there. So we continue to move forward. That's going well, but hasn't converted into that Series production award yet, which is a trigger where we put it in the order book.

[Aileen Smith, executive]

Our next question will come from Mark Delaney at Goldman Sachs.

[Mark Delaney, analyst]

The company noted that a double-digit percent of revenue is coming from non lidar hardware sales already. Can you detail where Luminar has had the most success so far? And how do you see these efforts progressing in areas like insurance, software and semiconductors? And then to what extent are these business adjacencies still ones you want to pursue if you are trying to be more cost optimized?

[Thomas Fennimore, executive]

I think you answered your own question where it's all of the above. We do have sales from Luminar semiconductor, which actually provides some of the critical components to our lidar. There are sales from that. I would say there are some sales not big in there for software, but it's more development work we're doing as opposed to actually selling it in serious production scale. So it's more for development work that we're looking to do. There isn't, I would say, anything material in there for insurance yet. And then we're looking to -- there are some sales in there in terms of monetizing some of the information we gather and we use mapping like that as well. And so we are making progress on that. It is, I would say, a material part of our revenue. But in the near term, Mark, what's really going to drive our revenue growth this year is getting the series production with Volvo and selling our lidar to them. One of the things we are hoping to do and it's one of the business milestones we set out here is to expand, I would say, that ecosystem around our lidar even more and manifesting that into the equivalent of series production wins.

[Austin Russell, executive]

I was going to say also on the topic there, too, in particular, for the Luminar AI engine that we announced at Luminar Day last year, that's been a huge driver as well in being able to realize success with the ecosystem. So that's a critical part of that. And I think like said, we're going to outline more of the details around the ecosystem at Luminar Day, in particular. But to Tom's point, I think we actually haven't counted a lot of that stuff as well, like in the order book with example, there's no semiconductors in order book, none of that stuff because there's a lot of nuance to it. So I think we can provide more detail on that. But it's also important, like when you talk about the incremental costs, a lot of the stuff that we're talking about in terms of like the long-term work. Like I would say even as it relates to like lidar and industrialization, historically, we may have been a lot more open to product customizations for certain types of customers and like autonomous vehicle companies and robo-truck companies out there, for example. And those do have a real cost and when the revenue opportunity is probably in the same vicinity as the cost of what it takes to actually do that and execute that at best, then you obviously have to have to question those things. And obviously, you're making it up front. So I think there's a lot of lower-hanging fruit as well that we can do where I would say probably like 80% to 90% of the value is in the top, probably a little more than 80% of the values in the top, like 50% of the initiatives that we have. So that's where we can work with the dial on that as well to be more conservative or more aggressive, depending on how much we want to spend. And obviously, we're starting this year, as I mentioned earlier, we're going to lean much more towards the conservative end of that.

[Mark Delaney, analyst]

And my other question was just about one of your objectives for this year, which is you passed the final run at rate test for the EX90. Maybe you can talk about what steps Luminar still needs to achieve in order to be ready to pass that final run at rate test. And what's different from the run rate test you had talked about passing on the last quarterly call.

[Thomas Fennimore, executive]

That final test is, I would say, at a higher rate, which reflects I would say, Phase 2, where they want us to be able to produce that and it has more strict standards in measuring the quality and the yield that comes off of that. And so I think we're going to have the results of that test very soon. And based upon the work that the team has achieved to date, we're very confident that the results of that test are going to be positive. But when we have official results, then we'll share more broadly, but that's not something we're losing a lot of sleep at night.

[Austin Russell, executive]

That's basically the final green light for a launch over the coming year.

[Aileen Smith, executive]

We'll take a few more questions from the safe platform and from our institutional investors. A question for Austin. It seems like there are examples of lidar being used in agriculture, industrial and military segments, is Luminar actively targeting these businesses?

[Thomas Fennimore, executive]

This is going to be a key initiative for us in 2024, particularly as we've industrialized Iris and we got the manufacturing plant up and running. That is going to give us the supply to sell more into this market. We had our business development team spend more of their time in this segment. It's nowhere near as big of a volume as there is in the passenger vehicle space, you can actually get better pricing in this segment, which helps the margins. But now that we've industrialized the product, this is going to be more of a focus area for us, but the priority by far is still going to be on the passenger vehicle side, and that's where we're going to have our teams spend the incremental portion of their time line.

[Aileen Smith, executive]

A question for Tom. When are we expecting Luminar to be profitable?

[Thomas Fennimore, executive]

Right now, we're focused on getting to the Volvo SOP. And as we're getting there, we're going to start aggressively attacking our unit economic costs and streamlining the business. I want to see how that plays out, call it, over the next couple of quarters before giving an updated guidance on when exactly that's going to be.

[Aileen Smith, executive]

And a follow-up to that, will Luminar need to sell more stock to fund operations?

[Thomas Fennimore, executive]

I think a similar question there. We have $340 million of pro forma liquidity, as we mentioned earlier. What we want to do is, as again, get to that Volvo SOP assess what that ramp-up is going to look like, assess how we can streamline our unit economics as well as our operations and then look at the balance sheet and figure out what, if any, actions we want to make getting the Volvo SOP is step 1. And then from there, we'll figure out what if anything we need to do to address the balance sheet.

[Austin Russell, executive]

I'd also state is just generally there, too. We're, of course, always thinking about it, and we do understand the importance and not lost on us when it comes to operational efficiency overall. And that's where I think that whole wartime mentality comes into play when it comes to like a cost standpoint and realizing the economy of scale and realizing that $1 billion investment. And we've always have great interest when it comes from a private side and back in those days, and now as a public business, it's a different world. But I think our mentality is definitely shifting around that balance, and that's where you start to see, like I said, with the cost downs from this quarter, and that's where we're going to spend more time on that.

[Thomas Fennimore, executive]

But you have one, you got to prove you can make them and then you aggressively attack the cost to make them as to what its cost and we're now transitioning to step to.

[Aileen Smith, executive]

Our next question from the analyst community is going to come from Yan Dong at Deutsche Bank.

[Yan Dong, analyst]

I was wondering if you can provide an update on the competitive landscape during our Qs, maybe an update on your win rate and particularly in U.S. and China. And then also on the order book update, I just wanted to clarify if that's something that you will no longer provide in the beginning of the year as you had in the past couple of years?

[Thomas Fennimore, executive]

Let me just clarify here. We're going to continue to give order book updates at the end of the year. Right now, we're focused on getting to Volvo SOP and getting better clarity on when some of the decisions were -- or conversations when those are formally going to be decided. But we're going to continue to update our order book at the end of the year. We just haven't given any guidance yet in terms of how much we expect it to grow this year, but it will grow, and we are confident that it's going to grow significantly. On the competitive landscape, we're starting to see the rationalization come. You're starting to see some of the startups, just some of that rationalization starts to take place. I think it's going to accelerate here as balance sheet start to get tighter and tighter and tighter and the fundraising environment gets tougher, tougher and tougher. #We've also seen some of the big companies, whether they're Tier 1s or other technology companies have been in the lidar space look to exit. You guys can go over the list of Tier 1 suppliers that either had lidar partners or tried to do it on their own that are no longer trying it. We started off the call with a question about Mobileye and Intel and it looks like they're stopped work together on lidar. This is tough, industrializing this very complicated technology. We've learned this over the last 3 years. Now we've come out successfully on the other end, and we've learned a lot, and we're going to apply those learnings to make Luminar leaner and meaner going forward. But the level of competition that we're seeing in these RFQs is declining. And there's really only a handful of lidar companies if that, that we think the automakers are seriously considered to deploy on their vehicles in the coming future.

[Austin Russell, executive]

And I think if you look at Five years ago, 6 years ago, I think we counted a little around 200 different initiatives for lidar in terms of different companies and Tier 1s and automakers and technology companies. I think now in the -- I can count on one hand how many are left over and viable. I just want to be super clear though, when it comes to a product performance perspective and the capabilities that's going to enable, that's really the thing that Luminar has always been uncompromising on. There are ways to take short cuts. There are ways to develop laser capabilities using office shelf components there are ways to do all of these things. Like the whole point is to be able to operate safely and highway speed, like that's the thing where if you want to be able to do that, you need to implement a Luminar. If you want to go for a different product scope, then you can talk about a different kind of -- in theory, as possible to integrate a different solution. But nevertheless, I think in any scenario, regardless of all of that, this is the first time, of course, in the case of Volvo, where we actually start to see this launch at global scale and be able to actually get into the hands of consumers much less standardized on a production vehicle like that. And showing off those forecast capabilities.

[Aileen Smith, executive]

Our last question is going to come from Jaime Perez at R.F. Lafferty.

[Jaime Perez, analyst]

I know we have Volvo coming up. Who else is one lineup? We've talked about Polestar and also the announcement of Geely only lots technology. You have a partnership with Geely, so who next in a lineup?

[Thomas Fennimore, executive]

I don't think we've announced anything publicly with like Lotus or Geely. So I just wanted to correct that. But Volvo EX90 is coming after that, we'll be Polestar II. After that, we'll be Mercedes-Benz and after that, will be some other stuff we'll talk about at the right time. But as we talked about with our order book, we have in excess now of 25 awarded vehicle lines and major programs. And I would say a vast majority of them are going to be launching really over the next 36 months. The most difficult one by far is the first one, which we're more or less there on. We're very proud of the fact, like, look, Volvo publicly, they're going to be launching in Q2. If you look at what IHS forecast is for Q2, they are anticipating several thousand production units of the EX90. So we're more or less there. That's the first one. The next 24 plus should be nowhere near the level of difficulty as we've just gone through. And we've learned a lot, and we're going to be doing things better and more efficient. But in the next 36 months, we're going to be very busy launching our products on new vehicle lines and getting more vehicles out on the road with our technology. This summer, I think you're probably going to start to see vehicles. The bubbles on the road with our technology on it, very excited about it.

[Jaime Perez, analyst]

It seems like you have a deep lineup.

[Thomas Fennimore, executive]

We do. We've got a lot of work in front of us. But I think the tough part is behind us. Doing it the first time is the toughest. And I would say most of those vehicle lines are using the same product. So it's not like launching a new product, it's tough, taking the same product and putting on a new vehicle line. There's incremental work, there's an internment of cost, but nowhere near what it is of launching it for the first time.

[Jaime Perez, analyst]

Like Elon said out type of products or deferred.

[Thomas Fennimore, executive]

We've learned that the hard way over the last few years. And we've learned a lot, and we're going to become a better company as a result of that. Aileen I think that we're done.

[Aileen Smith, executive]

I'd like to thank everybody for sticking around and participating in the call, for the analysts that ask questions and for the investors and other folks who sent in questions and joined us. We look forward to talking with you next quarter.

[Thomas Fennimore, executive]

Thanks, everyone.

[Austin Russell, executive]

Thanks, guys. See you at Luminar Day.